The Rise and Fall of Blizzard Entertainment
Blizzard Entertainment brought to the world the once most popular online PC game, World of Warcraft. However, the game started to lose steam in the 2010s and Blizzard started creating other games to sustain their revenue stream. Let’s dive in to see what happened.
It all started in 1991 when three friends started Silicone & Synapse, a game software developer. Initially, they were working to support game releases on other consoles and computers but that changed in 1994. They renamed to Blizzard Entertainment and started releasing their own game titles. One of the first games released was the Warcraft, Orcs and Humans. And it was well received by gamers, who bought over 100,000 copies in the first year. It is a real time strategy game that involves collecting resources, building towns, assembling an army and defeating the opponent. The game was adapted on the big screen, with the release of the Warcraft movie in 2016.
Back in the days, multiplayer games required users to logon proprietary networks. And let me tell you, they were expensive to use, charging players by the hour or minute. Warcraft appealed to a specific niche of gamers who were tech savvy and had the time and money to spend. The majority of the other gamers were playing games on consoles produced by Nintendo and PlayStation. Warcraft was on its way to the top when Blizzard got bought by Davidson & Associates, who introduced the educational video game, Math Blaster. Warcraft 2, Tides of Darkness then followed in 1995 and Blizzard acquired a company that would become known as Blizzard North, that released the Diablo game series.
The true innovation was in 1996, with the launch of Battlenet. Initially, Battlenet allowed players to connect with other gamers and play multiplayer gaming sessions on Diablo, which became the number one game for most of 1997. The gaming industry was changing. Gamers did not have to pay the expensive per hour rate of proprietary networks. Instead, they could pay a subscription fee for an unlimited play time. Blizzard then launched Starcraft, which became another number one game in 1998. Starcraft increased the use of the Battlenet service, adding features such as game filters and ladder ranking to the service. Thousands of players would log in at any given time.
Blizzard changed hands many times, being part of CUC International, then Cendant Corporation to finally end up with Vivendi in 1998. Blizzard came up with a sequel to Diablo in 2000, which sold millions of copies in its first month. Mind you that at the time, the computer game market was still a nascent space. This brought Diablo 2 in the Guinness Book of Records for being the fastest selling computer game, selling more than 1 million units in the first two weeks. As the massively multiplayer online game industry took off, Blizzard released more Warcraft sequels, with Reign of Chaos in 2002 and The Frozen Throne in 2003.
Vivendi decided to sell off its media operations to General Electric in 2003, but it held on to the gaming division. The most successful creation of Blizzard was then launched a year later, World of Warcraft. This game broke all previous computer game records. The monthly subscription fee model made it into a winner take all market. At the time, players would most likely choose one or two of these MMORPG games and spent their time and money on them exclusively. Activision took an interest in World of Warcraft when they noticed the 1.1 billion-dollar revenues the game generated. Activision approached Vivendi to engage into merger talks, and the deal was effectively completed in 2008, with Activision Blizzard being formed.
Blizzard was conquering the Chinese market with the help of NetEase. They had a distribution agreement going on for StarCraft at first, but then World of Warcraft was awarded to them after the previous distributor faced regulatory troubles. NCsoft and Sony tried to take on World of Warcraft with better graphics and storylines. But the game continued to amass players, reaching over 12 million subscribers by 2010. Players were attracted to the questing part of the game, along with a well-balanced player versus player component. I have played the game until the Cataclysm expansion. When we look at the subscriber base over time, we can see the gradual decline since Cataclysm launched in 2010.
In my opinion, pushing the character levels to above 80 meant players needed to spend more time on the game. Questing for over 80 levels became draining at some point. And I think this is one of the reasons why players left the game. A lot of new classes were introduced as well, which was fine. But I am not sure how I feel about the new balance of power amongst the different classes. At some point, I just lost interest in World of Warcraft. I had played both factions, tried all classes and explored all regions. I am still an elf arms warrior at heart.
It’s a good thing that Blizzard decided to develop other games, like Hearthstone, which amassed more than 100 million players. At some point, Blizzard was working on a project known as Titan, but it was shut down due to internal troubles. A team salvaged the project and turned it into Overwatch, which became the highest selling PC game in 2016. It is now played by over 50 million people worldwide. Blizzard even created a whole esports ecosystem around the game. The revenue stream was further supported by the release of expansions for StarCraft, Diablo and World of Warcraft. If we take a look at Blizzard’s revenues, we can see the ebb and flow, corresponding to when games were released. They have been maintaining an average of 32 million monthly active users since 2019.
I am not sure how Blizzard can increase revenues from here apart from the usual launch of expansions or sequels. The parent company follows the same trend with its Activision and King divisions. The stock price took a massive hit at the end of 2018 due to a decline in monthly active users that led to lower revenues. The rise of free to play games like Fortnite definitely had a negative impact on them as well. A lot of you might wonder why the title of this episode is the rise and fall. Why not include the rise again portion? Well, this episode is specific to the Blizzard Division. From what I have read, I cannot say for certain that Blizzard will rise again. I am waiting to see what they do in the rise of competition from Epic Games, Electronic arts and Take Two Interactive. Or by the time this article is released, they might have risen again. Who knows?
Did you play any of Blizzard’s games? Why do you think World of Warcraft lost steam? What can they do to revive it? As always, let me know what you think.
